I'll love to have an Line of Sight engine for this game, so a lot of sight related abilities (invisibility/pre-cognition/night-vision/illusion spells/etc) can be added/removed in a mod, and the AI will know how to handle and utilitize special type of eye-sight to its advantage.
Brad has mentioned a watch tower won't 'see thru' a mountain. This is great, but if this is no LOS engine I expect it is hard coded, which is not good.
Here I just try to outline the basics of the LOS engine. Feel free to chime in!
Different units has "Sight Range" which is likely the same as the "Sight" statistics we saw from Brad's screenshoots.
As long as there is no 'obstacle' in-btw its sight range, the game will display the current situation to the unit/player every turn. Stuff behind the obstruction will not be shown at all, unless your current location is higher than the obstacles.
For example, when you build a watch tower, you can see behind your obstacles only because your gaurds are located at a higher place.
Different terrain has different % Cover value . A mountain has 100 % Cover, heavy brushes has 50% Cover, so when someone hide there, it can be 'seen' only 50% of time. You see it half of the time.
Different unit has a different % cover value. Placing a couple Giants in front can help hiding troops of normal size behind it. Maybe the Giants will have a inherent 30% cover value. So unless you have watchtowers (or on natural high ground) that are taller than the Giants, it is harder to confirm if there is other enemies tailgating the giants.
Units that are skilled with concealment may have 30% cover bonus that can be applied on top of the terrian value. Or player can instruct certain troop marching slower so that 10% cover bonus is bestowed.
New addition:
Weather effects like fog, cloud, rain, snowstorm etc should be able to change the % cover of all terrains tile. This will make Weather an important aspect of the game, as it determine whether your units can succesffully ambush your enemy. (I always hope weather is default feature that can be turned on/off at will.)
Guards that are instructed on patrol duty or sentry duty will have a bonus in spotting concealed units with their immediate surrounding. This bonus counteracts with the % Cover value of your enemy. The longer time the guard remain on patrol/sentry, the higher this bonus will be.